Video: Calculating earnings per share

Investors can make money by purchasing stock in companies that pay dividends on a per share basis. Companies that pay dividends regularly, such as every quarter, decide how much money they want to distribute to shareholders and make that payment after the quarter ends. To calculate Earnings per Share, you divide the income to be paid to shareholders of common stock by the number of outstanding shares. As you can see here in our worksheet, we have 45 million shares. This is 45,000, but because all values are in thousands, we have 45000x1000, which is 45 million outstanding shares.

Numbers and financial data drives today's business world and Excel 2007: Financial Analysis can help decode this information. The proper understanding of these numbers, and the formulas behind them, can be the gateway to corporate and personal success. Microsoft MVP (Most Valuable Professional) Curt Frye teaches basic fluency in corporate finance, enabling users to see the meaning behind essential financial calculations. Curt explains how to review formulas to ensure they have the proper inputs, and shows how to interpret formula output. He also covers how to calculate leverage ratios and amortization and depreciation schedules, as well as forecast future growth. Exercise files accompany this course.

Topics include:

Building a financial worksheet with Pivot Tables
Reviewing financial statements through common-sized balance sheets
Calculating percentage change over time in financial statements
Determining profitability ratios and return on investments
Studying liquidity and activity ratios through an average collection period
Computing the future value of an investment

Calculating earnings per share

Investors can make money by purchasing stock in companies that pay dividendson a per share basis.Companies that pay dividends regularly, such as every quarter, decide howmuch money they want to distribute to shareholders and make that paymentafter the quarter ends.To calculate Earnings per Share, you divide the income to be paid toshareholders of common stock by the number of outstanding shares.As you can see here in our worksheet, we have 45 million shares. This is45,000, but because all values are in thousands, we have 45000x1000, which is45 million outstanding shares.

We also have the net income available for shares of common stock, which is18000x1000 or 18 million.So then to find the Earnings per Share, you create a formula that divides theIncome Available for Common Shares, which is in B6, by the number ofOutstanding Shares, which is in B5, press Enter and you have an earning of 40 cents per share.There are some factors you should take into account when you're evaluating acompany based on their Earnings per Share. First off is that companies candecide against paying dividends to shareholders and instead retain theearnings to spend on items such as research and development, new officebuildings or equipment upgrades.

Earnings per Share can also be skewed positive by generating unusually highincome such as selling a product line to another company or negatively byone time charges such as writing off substantial debt.Companies can also buy back stock to reduce the number of outstanding shares,making the per share price look better.Be sure to check a company's public filings to see if they've bought backany shares recently.You should also be sure to determine whether a company has issued any preferred stock, which has paid its dividend before consideration, if any, is given to theholders of common stock.

Companies often give guidance regarding how much of a dividend they expect topay in future quarters. Comparing the company's Earnings per Share with theamount of money they retain for capital improvement and business development,provides a solid basis for evaluating the attractiveness of a company stock.

Learn by watching, listening, and doing, Exercise files are the same files the author uses in the course, so you can download them and follow along Premium memberships include access to all exercise files in the library.

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Learn by watching, listening, and doing! Exercise files are the same files the author uses in the course, so you can download them and follow along. Exercise files are available with all Premium memberships.
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